Copyright © 2013 Pearson Education, Inc., publishing as Prentice Hall10-1 Managing Behavior In Organizations Sixth Edition Jerald Greenberg

Copyright © 2013 Pearson Education, Inc., publishing as Prentice Hall 10-1

Managing Behavior In Organizations

Sixth Edition

Jerald Greenberg

Decision Making by Individuals and Groups

Chapter Ten

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Learning Objectives

IDENTIFY the steps in the decision-making process

DESCRIBE the different varieties of decisions people make in organizations

EXPLAIN the major approaches to individual decision making

IDENTIFY various factors that contribute to imperfect decision making in organizations

DESCRIBE the conditions under which individuals make better decisions than groups and groups make better decisions than individuals

EXPLAIN how various techniques may be used to improve the quality of decisions made by groups


Three Good Reasons Why You Should Care About . . . Decision Making

1. Functioning effectively in today’s business environment requires awareness of ways to improve the quality of decisions made in organizations.

2. Human decision making is inherently imperfect, although these imperfections can be overcome if you know what they are and how they operate.

3. Groups are widely used to make organizational decisions, although they frequently are not well-equipped to be making the kinds of decisions they are called upon to make.

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General, Analytical Model

Decision formulation– Identifying the problem– Defining objectives– Making a predecision – a decision about how to make a decision

• Decision support systems (DSS) Decision consideration

– Generating alternatives– Evaluating alternative solutions– Making a choice

Decision implementation– Implementing the decision– Following up

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Organizational Decisions

Programmed vs. Nonprogrammed

Certain vs. UncertainTop-down vs. Empowered

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Programmed versus Nonprogrammed

Programmed decisions are routine decisions, made by lower-level personnel, that rely on predetermined courses of action.

Nonprogrammed decisions are decisions for which there are no ready-made solutions. The decision maker confronts a unique situation in which the solutions are novel.– Strategic decisions are nonprogrammed

decisions that have important long-term implications for the organization and are made by coalitions of high-level executives.


Certain versus Uncertain

Consider: –Risk–Probability–Subjective probability– Information


Top-down decision-making puts the power to make decisions in the hands of managers, leaving lower-level workers with little or no opportunity to make decisions.

Empowered decision-making allows employees to make the decisions required to do their jobs without seeking supervisory approval.– More likely to lead to effective decisions– Helps build commitment to decisions

Top-down versus Empowered


Decision style – the particular manner in which an individual approaches decisionsDirectiveAnalyticalBehavioralConceptual

Level of indecisiveness – the degree to which individuals approach decisions eagerly instead of putting them off.

Decision Making: Individual Differences

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Decision StylesDirective: Prefer Simple, Clear solutions

- Make decisions rapidly

- Do not consider many alternatives

- Rely on existing rules

Analytical: Prefer complex problems

- Carefully analyze alternatives

- Willing to use innovative methods

Conceptual: Socially oriented

- Humanistic and artistic approach

- Solve problems creatively

- Enjoy new ideas

Behavioral: Concern for their organization

- Interest in helping others

- Open to suggestions

- Rely on meetings


Potential benefits of decision-making groups:– Pooling of resources– Specialization of labor– Greater acceptance of decisions

Potential problems of decision-making groups:– Wasting time– Group conflict– Intimidation by group leaders

Conclusion: neither groups nor individuals are always superior

Group Influences: Trade-offs


When members of a group develop a very strong group spirit – high levels of cohesiveness – they sometimes become so concerned about not disrupting the like-mindedness of the group that they may be reluctant to challenge the group’s decisions. Result: group members tend to isolate themselves

from outside information, and the process of critical thinking deteriorates.

Groupthink


Characteristics of decisions:– Decision makers face time constraints– Decision makers are sensitive to political

“face saving” pressure

Organizational Influences



Decision-Making Approaches

The Rational-Economic ModelThe Administrative ModelImage Theory


The Rational-Economic Model

Rational decisions - decisions that maximize the attainment of individual, group, or organizational goals

Rational-economic model - the model of decision making according to which decision makers consider all possible alternatives to problems before selecting the optimal solution


The Administrative Model

Administrative model - model of decision making that recognizes that decision makers may have a limited view of the problems confronting them– Descriptive approach

Decision makers consider solutions as they become available– Satisficing - decisions made by selecting the

first acceptable alternative as it becomes available


Imperfect Nature of DecisionsBounded rationality - the idea that

people lack the cognitive skills required to formulate and solve highly complex business problems in a completely objective, rational way

Bounded discretion – people limit their consideration of decision options to ones that fall within ethical or legal boundaries

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10-19

Image Theory

Image theory - a theory of decision making that recognizes that decisions are made in an automatic, intuitive fashion based on actions that best fit their personal standards, goals, and plans for the future.


Biases in Individual DecisionsFraming effectsHeuristicsEscalation of commitmentPerson sensitivity

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Framing Effects Framing effects refers to the tendency for people to

make different decisions based on how a problem is presented to them– Risky choice framing effect - when problems are

framed in a way that emphasizes the potential losses that could occur, people are more willing to take risks to avoid those loses

– Attribute framing effects - people evaluate the same characteristic more positively when it is described in positive terms then when it is described in negative terms


Heuristics are simple rules that are used to guide the decision maker through a complex array of decision alternatives– Availability heuristic - the tendency for

people to base their judgments on information that is readily available to them, although it may be inaccurate

– Representativeness heuristic - the tendency to perceive others in stereotypical ways if they appear to be typical representatives of the category to which they belong

Heuristics


People pick implicit favorites – preferred alternatives – early in the decision process.

People use other options to convince themselves that their choice was the right one – confirmation candidate.

Hindsight bias – the tendency for people to perceive outcomes as more inevitable after they have occurred

Person sensitivity bias – the tendency for people to blame others too much when things are going poorly and to give them too much credit when things are going well.

Escalation of commitment phenomenon – the tendency to continue to support previously unsuccessful courses of action because of sunk costs invested in them.

Biased Decision Making


Bias Toward Implicit Favorites


Improving the quality of group decisions:Brainstorming – group members are

encouraged to present their ideas in an uncritical way and to discuss freely and openly all ideas presented by others

Four rules:Avoid criticizing others’ ideasShare even far-out suggestionsOffer as many comments as possibleBuild on others’ ideas to create your own

Individuals vs. Groups


Tips for Successful Brainstorming


Hypervigilance – involves a frantic search for quick solutions to problems, going from one idea to the next in a sense of desperation looking for one that will work

Unconflicted adherence – sticking to the first idea that comes to mind, without considering alternatives

Unconflicted change – quickly changing course to adopt the first new idea to come along

Defensive avoidance – making an effort to actually avoid the problem at hand

Training to Improve Group Performance


Improving Group Decision Making

The Delphi TechniqueThe Nominal Group Technique


The Nominal Group Technique 1. A small group gathers around a table and receives instructions; problem is identified.

2. Participants privately write down ideas about solutions.

3. Each participant’s ideas are presented, one at a time, and are written on a chart until all ideas are expressed.

4. Each idea is discussed, clarified, and evaluated by group members.

5. Participants privately rank the ideas in order of their preference.

6. The highest-ranking idea is taken as the group’s decision.

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Copyright © 2013 Pearson Education, Inc., publishing as Prentice Hall10-1 Managing Behavior In Organizations Sixth Edition Jerald Greenberg